A debtor’s withdrawal of money from a bank account less than a year before filing for Chapter 7 bankruptcy resulted in the denial of a discharge of debt, based on a bankruptcy court’s finding of fraudulent intent. The debtor claimed that he withdrew the money because of concerns about a creditor’s methods of collection. The Bankruptcy Appellate Panel (BAP) for the Ninth Circuit Court of Appeals affirmed the ruling. In re Haag (“Haag I”), Nos. AZ-11-1661, AZ-11-1662, AZ-11-1663, memorandum (BAP 9th Cir., Sep. 27, 2012) (PDF file). The Ninth Circuit also affirmed, rejecting the debtor’s arguments that the court should consider his good intentions regarding the creditor’s allegedly questionable collection practices. In re Haag (“Haag II”), No. 12-60074, memorandum (9th Cir., Aug. 20, 2014).
The debtor was the sole owner of an engineering company called HTI, Inc. that had a line of credit with Northwestern Bank (NWB). In mid-2007, the housing market collapsed, and the company was not able to generate enough revenue to pay the debt. After an unsuccessful attempt to sell the business, the debtor surrendered all of HTI’s assets to NWB in late 2008. He informed the bank that he intended to file for Chapter 7 bankruptcy, and that his only sources of income were IRAs, social security, and unemployment.
In early 2009, the debtor received federal and state tax refunds totaling almost $250,000. He deposited “some or all” of the funds, Haag I at 5, into a personal checking account at the Bank of Tucson. He withdrew $120,000 in cash from that account in July 2009 and placed it in a safety deposit box that he had jointly rented with his wife at another bank. About three weeks later, NWB obtained a judgment against the debtor in a Michigan court, based on his personal guaranty of business debts, for approximately $1.7 million. The bank obtained a domesticated judgment in Arizona, where the debtor resided, in February 2010. The debtor filed for Chapter 7 bankruptcy the following month. Continue reading